Author: Ozan Candogan, University of Chicago
Consider a set of agents (receivers) whose payoffs depend on an underlying state of the world as well as each other’s actions. Suppose that a designer (sender) commits to a signaling mechanism which reveals payoff-relevant signals to agents when the state is realized. The availability of such signals influences the agents’ actions, and by choosing the signaling mechanism appropriately the designer can induce a desired outcome. Information design studies signaling mechanisms that maximize the payoff of the designer. In this paper, we first present the classical information design framework and discuss different approaches for characterizing the optimal information structures. We then discuss various applications in the recent operations literature. The applications include signaling (i) content/product quality in networked systems, (ii) product availability in revenue management settings, and (iii) seller quality in twosided markets. Finally, we present recent work that discusses the design of optimal information structures when some of the key assumptions in the classical information design problems (which may not hold in operational settings of interest) are relaxed.